Home Budget Tracker - helps you manage day to day spending. Use it to input receipts, track account balances, stick to your budget, and reconcile statements. Designed to be used by individuals and couples on the go at any stage of life.

Income Spending Simulator - projects the course of your financial life. It is useful when considering career changes, major lifestyle choices and retirement (how soon and how wealthy). For numbers oriented people it can be fun to play with as it is designed to be open-ended. The compare mode shows you what a specific change would have on cash flow, asset appreciation, and ending net worth.

The other day a light bulb in my office burned out. Even though LEDs bulbs were more expensive up front I analyzed the available options and ended up saving $192.06 over 5 years!

It worked by doing a total cost of ownership calculation right there in the aisle. There are major price and performance differences between LED and incandescent bulbs, both in up front cost, but also operating cost which is a big gotcha on many purchases.

The inefficient 75 watt incandescent light bulbs are still on the shelves for about $1, and the highly efficient 10 watt LED bulbs are $3-10 each.

The incandescents look cheaper because of the low up front cost but the operating cost is totally out of control.

I'm in good position and able to opt for LED bulbs because my wife and I agree that quality household items are a priority on the budget. We also both understand the idea of total cost of ownership and are happy to maximize our utility. This idea is useful not just for light bulbs but applies to most purchases.

LED vs Incandescent bulb cost breakdown over 5 years:

For this total cost of ownership example, let’s assume the light is on 12 hours per day, everyday, for the next five years. That is a total of 21,900 hours. We’ll also assume the lifespan of the LED is roughly 18k hours (about fifteen times an incandescent), not enough for 5 years, but I’ll need two at the most. Meanwhile the incandescents burn out every 3-4 months with this plan requiring 19 bulbs. What really matters more though is how the bulb wattage impacts my electric bill going forward.

Incandescent

LED

Cost per bulb

$1

$6

Life span

1200 hours

18,000 hours

Watts

75

10

Bulbs for 5 years
12 hrs / day (21,900 hours)

19 = $19

2 = $12

Electricity cost ($0.13/kWh)
[21900 hrs * (watts/1000) * $0.13]

$213.53

$28.47

TOTAL COST OF OWNERSHIP:

$232.53

$40.47

To light up my room for the next 10 years, I can choose between paying $6 now for the LED bulb and $40.47 over 5 years (including one extra LED to buy and install). Or with the incandescent I can pay $1 now and $232.53 over 5 years, plus the time waster of buying and installing 18 extra light bulbs.

LEDs use 13% of the electricity vs the incandescent bulb and their operational cost is a WHOPPING 83% lower! It’s not everyday investments like that come along! Yes I’ll take an LED bulb please!

It is a little sad that not having $5 today can lead to a $192.06 hit over 5 years. I feel sorry for the people who are forced into the cheaper short term option (because of money constraints). They end up paying almost six times more in the long run.

The Moral Of The Story - Look at Price but Decide By “Total Cost of Ownership” (TCO):

Always consider what future you has to do or pay as part of the purchase decision.

Here is what future you will end up paying:

Up front cost - what you pay today.

On going maintenance / operating cost. In the case of the light bulb it is the power draw. In the case of a car - gas, tune ups, tires, etc.

The cost of your time perform maintenance (even more if you DIY).

Any residual value. Moot in the case of light bulbs, but very relevant in the case of a car or piece of equipment.